Getting a private mortgage from a borrower perspective.....what's in it for them?

Lender · Dayton, OH · Member since 2018 · 117 posts · 19 votes

Studying this whole note world and I'm curious....

From a borrower perspective, what advantage do they have going with a private lender vs going through a mortgage company/broker?

Is it more because of a borrower not qualifying traditionally, property not qualifying, or they can get a better deal going private?

I would love some examples if possible.

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Chris SeveneyBusiness Member

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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

Quote from @Carlos Scarpero:

As a note investor, we rarely if ever originate loans for owner occupied, we would rather buy on secondary market at a discount.

The reason being you are correct, many times the borrower is not qualified for the loan, so my response to that is why do I want to give a loan to a borrower who does not have the ability to repay. There are occasions where the borrower does have ability but does not qualify for traditional - but that is rare.

Throw in the fact that I am not a bank so I can create loans out of thin air and only need a 10% reserve as another reason.

I can share good and bad stories - it really goes to underwriting the borrower and the price they pay (paying more) is irrelevant if they cannot make payments

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
Quote from @Carlos Scarpero:

Studying this whole note world and I'm curious....

From a borrower perspective, what advantage do they have going with a private lender vs going through a mortgage company/broker?

Is it more because of a borrower not qualifying traditionally, property not qualifying, or they can get a better deal going private?

I would love some examples if possible.

As a note investor, we rarely if ever originate loans for owner occupied, we would rather buy on secondary market at a discount.
The reason being you are correct, many times the borrower is not qualified for the loan, so my response to that is why do I want to give a loan to a borrower who does not have the ability to repay. There are occasions where the borrower does have ability but does not qualify for traditional - but that is rare.
Throw in the fact that I am not a bank so I can create loans out of thin air and only need a 10% reserve as another reason.
I can share good and bad stories - it really goes to underwriting the borrower and the price they pay (paying more) is irrelevant if they cannot make payments
7e investments53 Reviews
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Adam Walter
Rental Property Investor · Mason, OH · Member since 2015 · 97 posts · 136 votes
2y
Hi @Carlos Scarpero, I’m an investor in the Dayton and Cincinnati area and I’ve been both a private lender and private borrower.
As a borrower, I utilize my private lenders whom I pay between 8-12% to quickly purchase properties that are distressed or low in value. I’ll take a year or so to refinance those into a long term loan and then use their funds for a different property. These loans are so much easier and cheaper than a hard money loan.
As a private lender, I will sell a property with seller financing to someone who may not qualify for a loan or the property is distressed or low in value.

2 Reply
Carlos Scarpero
OP
Lender · Dayton, OH · Member since 2018 · 117 posts · 19 votes
2y
Quote from @Chris Seveney:

Quote from @Carlos Scarpero:

Studying this whole note world and I'm curious....

From a borrower perspective, what advantage do they have going with a private lender vs going through a mortgage company/broker?

Is it more because of a borrower not qualifying traditionally, property not qualifying, or they can get a better deal going private?

I would love some examples if possible.

As a note investor, we rarely if ever originate loans for owner occupied, we would rather buy on secondary market at a discount.
The reason being you are correct, many times the borrower is not qualified for the loan, so my response to that is why do I want to give a loan to a borrower who does not have the ability to repay. There are occasions where the borrower does have ability but does not qualify for traditional - but that is rare.
Throw in the fact that I am not a bank so I can create loans out of thin air and only need a 10% reserve as another reason.
I can share good and bad stories - it really goes to underwriting the borrower and the price they pay (paying more) is irrelevant if they cannot make payments

Interesting. Thanks for the reply
0 Reply
Carlos Scarpero
OP
Lender · Dayton, OH · Member since 2018 · 117 posts · 19 votes
2y
Quote from @Adam Walter:

Hi @Carlos Scarpero, I’m an investor in the Dayton and Cincinnati area and I’ve been both a private lender and private borrower.
As a borrower, I utilize my private lenders whom I pay between 8-12% to quickly purchase properties that are distressed or low in value. I’ll take a year or so to refinance those into a long term loan and then use their funds for a different property. These loans are so much easier and cheaper than a hard money loan.
As a private lender, I will sell a property with seller financing to someone who may not qualify for a loan or the property is distressed or low in value.

Thanks for the reply. I'm not too far from you. I'm sure I'll see you around some time,
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John Jacobs
Indianapolis, IN · Member since 2012 · 74 posts · 22 votes
2y
@Carlos Scarpero
I am not sure that I am completely clear on your question as you phrased it but I will answer it this way:
Two big advantages of getting a loan through a private money lender are: (1) Speed (2) Flexibility.
JJ
1 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
2y
Quote from @Carlos Scarpero:

Studying this whole note world and I'm curious....

From a borrower perspective, what advantage do they have going with a private lender vs going through a mortgage company/broker?

Is it more because of a borrower not qualifying traditionally, property not qualifying, or they can get a better deal going private?

I would love some examples if possible.
1. Property does not qualify for institutional financing
2. Borrower does not qualify for institutional financing
3. Institutional financing is too slow
4. Borrower does not want to reveal certain financial or personal information
5. Borrower wants to finance through a remote entity without personal guarantee

Private Mortgage Financing Partners, LLC
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